Hind Charitable Trust Vs PCIT (ITAT Lucknow)
Conclusion: Retrospective cancellation of registration was held to be invalid as the scheme of Act did not permit cancellation of registration under Section 12AA(3) with retrospective effect in absence of explicit statutory authority.
Held: Assessee-trust, engaged in medical education and healthcare activities, was granted registration under Section 12A w.e.f. 01.04.2005. Pursuant to a search under Section 132, AO completed assessments for AYs 2008–09 to 2014–15 making additions on account of alleged capitation fees, inflated hospital receipts, and violation of Section 13(1)(c). Relying on these findings, Principal Commissioner cancelled the registration under Section 12AA(3) with retrospective effect from 01.04.2007. Subsequently, Tribunal set aside the original assessments for failure to examine seized digital evidence and restored the matter for fresh adjudication. In the de novo assessments, AO accepted the assessee’s reconciliations and deleted major additions. Assessee challenged the retrospective cancellation before the Tribunal. Assessee contended that Section 12AA(3) did not empower retrospective cancellation of registration; cancellation was based solely on original assessment orders, which stood set aside and were later substantially reversed; there was no independent application of mind by the Principal Commissioner; alleged violations, even if any, could at best justify denial of exemption for specific years and not cancellation of registration. Revenue contended that cancellation was justified based on findings of search and assessment proceedings subsequent developments would not invalidate the satisfaction recorded at the time of passing the cancellation order. It was held that the scheme of Act did not permit cancellation of registration under Section 12AA(3) with retrospective effect in absence of explicit statutory authority. The expression permitting cancellation of registration granted “at any time” did not authorize retrospective operation so as to unsettle concluded assessments. The impugned cancellation was based entirely on findings recorded in the original assessment orders, which were subsequently set aside by the Tribunal and largely reversed in fresh assessments. Once the very foundation of the satisfaction recorded by the Principal Commissioner ceased to exist, the cancellation order became unsustainable. Alleged violations under Section 13, even if established, were to be examined in assessment proceedings and did not automatically warrant cancellation of registration.
This appeal has been preferred by the assessee against the order dated 19.02.2021 passed by the Ld. Principal Commissioner of Income Tax (Central) [hereinafter called the ‘PCIT(C)’], Lucknow, wherein, vide the impugned order, the ld. PCIT(C) has exercised jurisdiction under Section 12AA (3) and Section 12AA (4) of the Income Tax Act, 1961(hereinafter called ‘the Act’) to cancel the registration previously granted to the Assessee under Section 12A of the Act. A critical facet of this cancellation is its retrospective application, whereby the registration has been revoked with effect from 01.04.2007.
